"People are living longer so we have to increase the Social Security age." You hear that a lot. Here is why this is just wrong.
"Life expectancy" is a technical term used in statistics. It almost always means "life expectancy at birth" instead of what people think it means: life expectancy at age 65. But lots of people confuse the meaning of "life expectancy" with "longevity."
Here is how life expectancy works. Suppose it's 1900 and 100 babies are born. In the next few years half of them die, while the rest survive and live to be exactly 80. So the life expectancy at birth of those 100 babies is 40. If 100 are born in 1950 and 3/4 live to 80, life expectancy has risen by 50% to 60. People are still living to 80, but "life expectancy" has increased by 50%. In other words, people are not living to 120 instead of 80, more people are making it to 80.
Applying The Mistake
Here is how people are mistakenly using this today. They are confusing "life expectancy at birth" with estimates of how old people can be expected to get, or longevity. In the above hypothetical example life expectancy increased 50% but people were still only living to 80.
Here is what happens if you make the mistake of using increasing life expectancy to predict longevity. Suppose it is 1980 and 100 babies are born. In the next few years 30% of them die, and the rest will live to be 80. Life expectancy at birth is 56! Then suppose it is 2000 and another 100 babies are born. Suppose 10% die and 90% of these babies will live to be 80. Life expectancy at birth is now 72! In 20 years life expectancy has gone from 56 to 72! It is going up by 16 years every 20 years.
Does this mean that by 2020 people will live to be 88 and by 2040 they will live to be 104? No, it means that more people are making it to 80 and says nothing about how long they will live.
But in the current Social Security discussions, people are making this mistake. Here is an example from Fox News, Longer Life Expectancy Straining Social Security, Analysts Say,
When President Franklin D. Roosevelt signed Social Security into law in 1935, it was a lifeline to poor seniors and an easy promise to keep – the retirement age was 65 while life expectancy was 63, noted Rep. Paul Ryan, R-Wis., a member of President Obama's fiscal commission.
"The numbers added up pretty well back then," he said with a chuckle. "It was never designed to be a program that would last 25 or 30 years and so that's one of the reasons why there is so much fiscal pressure on it."
For Social Security we need to look at life expectancy at age 65, not at birth. In 1940 men who reached 65 were expected to live another 12.7 years and women another 14.7. By 1990 that had increased to 15.3 for men and 19.6 for women.
Social Security Already Accounts For Age Increases
In fact, the original designers of Social Security understood this and designed the system to account for such increases. And the 1983 changes in Social Security revised that, and projected the numbers to exactly where they are today. The program is sound and actually has a huge surplus saved up for the future.
Here is another very important thing to know: those gains in longevity -- the numbers that show people are actually living a few years longer -- have mostly gone to the high earners, not to the regular working people who depend on Social Security. So changing the age of retirement or cutting the amount it pays because of age increases would hurt the very people who are not living longer!
Increase Social Security
People use misleading arguments like life expectancy to trick the public into thinking Social Security pays too much, too soon. In fact, Social Security pays too little and starts too late. The retirement age should be lowered, and the amount it pays should be increased.
The argument for cutting Social Security is that is "costs" too much. But this argument does not take into acocunt the gains to the economy that come from the program. Yes, you can cut Social Security today and that saves some money in the Social Security budget -- and theoretically keep taxes lower for the rich -- but does it really save money or cost money in the larger government budget? There are effects on the larger budget to consider.
- Does cutting Social Security cause the elderly to cut back on food and prescriptions, which raises Medicare costs?
- Does increasing the retirement age cause unemployment to increase, which raises safety-net costs while lowering government revenue?
- Does cutting Social Security cause the elderly to spend less at local stores, thereby lowering sales, which lowers tax receipts and causes layoffs which raise safety-net costs and further lower tax receipts?
- Etc. with dozens of other ripple-effects on the economy.
By the same token, wouldn't lowering the retirement age cut unemployment, and increasing Social Security boost the economy?
This is from the Progressive Change Campaign Committee:
Watch Senator Tom Harkin comfort an Iowa woman who needs Social Security.
But watching this video and saying, "That's powerful" is not enough. Senators Tom Harkin and Mark Begich need you to tell Congress that Americans support expanding Social Security -- not cutting it.
Please call your Senators and ask them to co-sponsor Senators Harkin and Begich's bills to expand Social Security.
This is from CREDO Action: Tell the Senate to support the Harkin and Begich plans to strengthen Social Security.
Social Security, one of the greatest anti-poverty programs in our country’s history, is under attack by people who want us to believe the myth that it's about to run out of money.
We are told the only way to save the program is to slash benefits. But, Social Security benefits are already inadequate.
In an era of skyrocketing medical costs, disappearing home equity, paltry 401k retirement accounts and underfunded pension plans, retirees need more money, not less. And there’s a simple change that would allow us to increase benefits without breaking the bank.
This is about human priorities -- we can afford to increase Social Security the same way we could afford to bail out Wall Street, the same way we could afford to invade Iraq, the same way we can afford to give oil companies huge tax breaks and the same way we continue to pump trillions into the military budget. It is about assigning priorities.
